Yesterday I discussed the news that China had surpassed the
United States as the
world's leading manufacturer, and wondered about the national
security implications of this. I also mentioned that my CNAS colleague, the
very smart Abe Denmark, counsels not
to worry so much. Here he explains why he is cool with it.
By Abe Denmark
Best Defense Beijing bureau chief
China's rising economic power continues to set records. A few weeks after
overtaking Japan as the world's second-largest economy, a report by a U.S.
economics consultancy estimates that China recently overtook the United States
as the world's top manufacturing country by output, ending America's 110- year
dominance. Experts suggest this marks a "fundamental shift in the division
of labor" that is unlikely to change soon.
This frankly comes as no surprise, and was a long time coming. The sheer size
and economies of scale (not to mention low wages and lax protections for civil
and environmental issues) make China a natural hub for heavy manufacturing.
With roughly one-fifth of the entire world's population, it is only natural
that China continue to gain a leading economic position as it slowly embraces
market-based economic policies.
Yet China's rapid growth is far from assured over the long-term. Due to its
one-child policy, China's demographics over the long-term are not promising,
and China may very well get old before it gets rich. China is also facing
significant internal challenges, born from frustration over rampant corruption,
vast economic inequalities, and environmental degradation. Moreover, China's
gargantuan population means that every year a new generation of college
graduates hits the job market, and high levels of economic growth -- roughly 8
percent annually -- are needed simply to keep unemployment down.
No one is more aware of these challenges than China's leadership. Earlier this
week, China concluded a session of its National Congress, passing a new 5-year
plan that guides government investments and priorities until 2016. The new plan
calls for lower levels of growth and a concerted effort to address economic and
social inequalities. China's leaders recognize this will higher unemployment,
meaning China may be facing challenges it has not confronted since its economy
began to take off, over thirty years ago.
Yet these slower levels of economic growth, targeted to be at 7 percent, are
still far beyond the levels of growth likely to come out of the United States
and the West. American economists are now looking down the road at when China's
economy overtakes that of the United States. Goldman Sachs puts the date at
2027, while a more recent report from CitiGroup puts the date at 2020.
So what are the military implications of a rising Chinese economic power with a
higher manufacturing output capacity than that of the United States? This is a
bit of a macabre exercise, as a large-scale military confrontation between the
United States and China would likely produce a horrific economic and human toll
that all should seek to avoid if at all possible. Yet such considerations merit
examination; as Tom Ricks pointed out in an email discussion about this report,
"the British lost manufacturing dominance in about 1885, didn't realize
it, and found out the hard way during World War I." Is America slated to
be the next UK, watching the world move on from our outdated economic system?
Only time will tell, but I do not think so. In World War II, the United States
demonstrated an incredible ability to surge manufacturing capacity to defense
industries should the need arise. Factories that made cars were converted to
make tanks and planes, and the United States eventually out-produced its
enemies. Personally, I would never bet against the ingenuity of American
industry when the need arises.
Moreover, the nature of warfare has likely changed in the past 125 years. In
1885, the United Kingdom lost its manufacturing lead just when manufacturing
output capacity was a key determinant of military power in a mass, mechanized
age of warfare. Today, if my old boss Secretary Rumsfeld is correct, the key to
military power is not only mass manufacturing capacity but rather a military
that is quick, maneuverable, coordinated, and precise. These are tasks at which
the U.S. military is exquisitely good, and our advantage in this sense is not
likely to wane for the foreseeable future. China's defense industry, while
improving in quality and technology, seems to still be a few steps behind and
is unlikely to catch up any time soon. The key for China's military, therefore,
is to use quantity to make up for lower quality.
Let's hope we never have to test these hypotheses. To paraphrase Winston
Churchill, it's far better to trade trade than to war war.